Outsourcing Finance & Accounting function for Non Profits…. A Necessity or a Need?

From churches to youth organizations to local chambers of commerce, nonprofit organizations are prevalent throughout every community. Unlike for-profit businesses that exist to generate profits for their owners, nonprofit organizations exist to pursue missions that address the needs of society at large.

With more than 1.5 million nonprofit organizations in the United States, nearly 1.2 million have annual budgets of less than $1 million, and most are even smaller. These organizations have a critical role to play in addressing the needs of the underserved and underpenetrated sections of society. Since these nonprofits have a mission that drives the work that they do, even if there are government contracts to fund this work there is still the need for a regular supply of funds by way of contributions, membership dues, program revenues, fundraising events, public / private grants or investment income. Fundraising and access to sustained grant revenue is undoubtedly critical for nonprofits to ensure continuity of their noble efforts.

According to the annual philanthropy report, “Giving USA”, charitable giving reached an all-time high of $358 billion in 2014. By any standard, that’s a tremendous amount of money, and represents nearly 2 percent of United States’ Gross Domestic Product (GDP). To put this in perspective, that’s slightly greater than Colombia’s GDP (ranked at 32) and just below United Arab Emirates’ (ranked at 31).

With the considerably large sums of monies at stake here, the funding sources and donors are extremely wary of how the funds are being managed. As nonprofit leaders, it is critical to be able to report back to these funders how they funds are spent, whether it’s a government agency, a private foundation or an individual contributor.

Donors will contribute or grant funds to those organizations with the most efficient financial management practices and to those that prove themselves able to adhere with the compliance requirements for each individual funding source.

However, it’s not always easy!
Private donors increasingly want access to up-to-date information about an organization’s operations and finances as a way of ensuring return on their investment. Additionally, the added pressure to allow access for audits to maintain compliance without any professional guidance makes it more difficult for the organization to remain focused on their core purpose. Some non-profit organizations might have the know-how for the accounting and financial bookkeeping practices necessary for basic government or funder requirements; however, they fall short of critical analysis and benchmarking information and may not be able to make prudent management decisions. In some cases, there is lack of awareness of the ever-changing financial reporting practices, or simply may not have the capacity to deliver on contracts or assess new grant opportunities. Inadequacy of specialized knowledge of nonprofit finance, in turn, can lead to bad decision-making.

Specialized nonprofit accounting services backed by efficient technology and trained accounting professionals, enable nonprofit leaders to focus on their mission and use the funds judiciously. Professional audit process facilitation and customized financial reporting practices equips nonprofit volunteer leadership with up-to-date financials while still maintaining the additional burden of satisfying regulatory and compliance guidelines.

Access to accurate, timely financial reporting through outsourced specialist service providers who work as partners, has emerged as more of a necessity than merely a need. Today, many nonprofits are moving towards outsourcing their accounting services to third-party companies that specialize in the field of Not-for-Profit Accounting. By doing this, Nonprofits can enjoy a return-to-focus on their mission while still ensuring return-to-investment for the donors.

The results are very clear; at one end nonprofit organizations gain access to sustained funding while at the other, access to 24/7/365 financials enhances efficiencies and reduces internal control deficiencies. This, in turn, helps to open new doors for sustained funding and allows nonprofits to pursue their mission!

In summary, there are at least five reasons why nonprofit organizations need to consider outsourcing their finance and accounting functions:

  • 1. Produce high quality financial reports to improve decision making
  • 2. Make well-informed decisions about programs and budget priorities
  • 3. Improve accountability both internally and externally to funders and donors
  • 4. Monitor accounts receivable and cash flow
  • 5. Achieve ongoing, reliable compliance reporting to maximize funding

Now that outsourcing has emerged as a key factor for ensuring success in the pursuit of your mission, there’s another critical area to take into consideration. Before outsourcing accounting and financial management to a third-party, it’s very important to make a well informed decision and to take time to choose a service provider whose expertise, business model and pricing meet the needs of your specific organization. Quatrro has a long history in doing just this for our clients in the nonprofit arena.

If you are a nonprofit leader and would like advise on streamlining your financial processes or for enhancing operational efficiencies at Click Here


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